Overpay monthly or lump sum yearly

T

tom1ie

Registered User
Messages
126
Hi all,
Just wondering is it better to overpay 2k a month off my mortgage (UB fixed at 2.3% allowed to overpay 20% of overall sum of mortgage), which lowers the monthly repayment The bank requires (not including the amount I’ll overpay)
Example repayment in January =1000, I pay 3000, repayment in February is 990, I pay 2990, repayment in March is 980 I pay 2980 etc etc
Or is it better to pay off 24k at the end of the year?
Or does it make any difference?
Thanks guys.
 
Interest on a mortgage is charged on the balance every day.

So if you owe €100,000 today, you will be charged €6.30 a day ( €2,300 a year /365 days)

If you reduce this to €76,000, you will be charged €4.78 a day.

So you are better off paying the money off up front.

That is assuming that there is no difference in the penalties for early repayment of a fixed rate. But even if there is such a penalty, it's still probably the right thing to do.

Brendan
 
Brendan Burgess said:
Interest on a mortgage is charged on the balance every day.

So if you owe €100,000 today, you will be charged €6.30 a day ( €2,300 a year /365 days)

If you reduce this to €76,000, you will be charged €4.78 a day.

So you are better off paying the money off up front.

That is assuming that there is no difference in the penalties for early repayment of a fixed rate. But even if there is such a penalty, it's still probably the right thing to do.

Brendan
Click to expand...

yeah though so Brendan thanks.
 
Double check the overpayment, UB only allow us to overpay 10%. Also they had us sign a form that fixed the payment to our requested amount (within the 10% limit) so this avoided the reduction on the next payment issue.
 
I seem to recall some time back that someone did a calculation of paying their mortgage payments as 52 weekly payments instead of 12 calendar month payments and so by doing this they cut quite a bit off the end time of the mortgage.
 
Yeah, I recall that.

I think they were dividing their monthly payment by 4 and paying this amount weekly.

You would then be paying 13 monthly payments rather than 12, same as overpaying by over 8%, thereby decreasing the interest paid and the term.

€1000 monthly payment is repaying €12,000 annually.

€250 weekly payment is repaying €13,000 annually.
 
john luc said:
I seem to recall some time back that someone did a calculation of paying their mortgage payments as 52 weekly payments instead of 12 calendar month payments and so by doing this they cut quite a bit off the end time of the mortgage.
Click to expand...

I seem to recall that mistaken notion was quickly corrected.
 
tom1ie said:
Example repayment in January =1000, I pay 3000, repayment in February is 990, I pay 2990, repayment in March is 980 I pay 2980 etc etc
Or is it better to pay off 24k at the end of the year?
Click to expand...
If as your example states, the only options are to overpay monthly by 2k or save the 2k each month and pay off 24k at the end of the year, then overpaying monthly would save you more interest. If however, you already have the 24k saved at the start of the year then paying it immediately is obviously the better option.
 
Coldwarrior said:
If as your example states, the only options are to overpay monthly by 2k or save the 2k each month and pay off 24k at the end of the year, then overpaying monthly would save you more interest. If however, you already have the 24k saved at the start of the year then paying it immediately is obviously the better option.
Click to expand...

yeah it’s be the 2k per month. I don’t have the 24k unfortunately!!
 
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